The Determinants of Capital Structure Choice

ABSTRACT

This paper analyzes the explanatory power of some of the recent theories of optimal capital structure. The study extends empirical
work on capital structure theory in three ways. First, it examines a much broader set of capital structure theories, many
of which have not previously been analyzed empirically. Second, since the theories have different empirical implications in
regard to different types of debt instruments, the authors analyze measures of short‐term, long‐term, and convertible debt
rather than an aggregate measure of total debt. Third, the study uses a factor‐analytic technique that mitigates the measurement
problems encountered when working with proxy variables.